(P1) Digital Asset’s Canton Network on May 3 rolled out new features allowing financial institutions to construct custom security “guardrails” for their decentralized finance operations on the public, permissioned blockchain.
(P2) “They have to make sure that bad actors cannot engage with their systems. That’s what they’re responsible for from their fiduciary duty as a traditional organization,” Yuval Rooz, co-founder and CEO of Digital Asset, told Decrypt, referencing concerns from Wall Street firms about state-sponsored hackers.
(P3) The new tools allow participants to enforce address whitelisting, set transaction limits that can trigger manual approvals, and restrict interactions with specific smart contracts. The move comes as institutions weigh the risks of DeFi, with a TRM Labs report indicating North Korean-linked groups have stolen over $6 billion in crypto since 2017.
(P4) The development highlights the central tension in DeFi between permissionless ideals and institutional demands for security. While crypto purists criticize Canton’s design for allowing user controls, Rooz argues such safety parameters will be essential for any consumer-facing applications and for attracting significant institutional capital to the space.
### Institutions Get the Keys
The new features on the Canton Network provide a toolkit for firms to define their own risk tolerance. Unlike the one-size-fits-all security models of many open networks, Canton allows a bank or asset manager to configure protocols that match their specific regulatory and compliance needs. For example, a firm could enforce time-delays on large transfers to give its security team a window to intercept suspicious activity.
This approach directly counters the fears holding many institutions back from DeFi, where a single compromised key can lead to millions in losses with no recourse. Rooz noted that while participants can still create unrestricted environments similar to Ethereum or Solana on Canton, he expects most will opt for stricter safety measures.
### The Centralization Debate
The launch comes amid a broader industry debate over the role of centralized controls in DeFi. When Arbitrum’s 12-member security council recently moved to freeze $71 million in funds stolen in the Kelp DAO exploit, it sparked controversy over whether the action compromised the permissionless nature of DeFi.
Rooz defended the move. “Nobody should say that that’s a bad thing,” he said. “One of the things that, to me, is pretty interesting about DeFi is that people want all the freedom in the world with none of the risks.”
This dynamic is already visible among stablecoin issuers. Tether has actively worked with authorities to freeze funds linked to illicit finance, while USDC-issuer Circle has stated it will not lock stablecoins without a court order, showing different approaches to the same problem. Digital Asset is betting that for institutions, the ability to proactively block threats will be a key selling point, shifting such controls from a controversial feature to an industry standard.
This article is for informational purposes only and does not constitute investment advice.
